This blog's purpose is to document the local excesses from the housing bubble era.

Monday, August 11, 2008

Chasing down the Market

One common problem in the current markets is for people to over price their properties or turn down what they consider a low ball offer. With prices still falling and the inventory surging that low ball offer may just be the best offer one will get. This problem was the focus of The Record article titled Why your home hasn't sold yet. The main focus is on a small older house on a busy road in Allendale. While it is a sad story for the owner it is a perfect cast-study for everyone else. Let's take a look -

In October 2005, David Raimondi put his 100-year-old Allendale house and barn on the market, asking $525,000. It's been almost three years, and the property has still not sold.

...There's a reason this is a real estate cliché. Within a week or two after Raimondi first listed his house in October 2005, he got an offer for $495,000 - $30,000 less than his asking price. He turned it down, convinced he could do better. But the real estate market began to slide in late 2005 and has not recovered yet.

...Even today, Raimondi insists his house is worth $450,000 - after all, it is in Allendale, an upscale town with fine schools. In addition, the property is 200 feet deep and includes the barn.

"If you've gotten two or three offers at the same number, that's where the market is," she said.

...For now, Raimondi's house is off the market again. He can afford to wait because he hasn't found another house. He hopes that by 2009, buyers will begin returning to the market, and he'll put the house up for sale again then.

"I'm not going to give it away," he said. "I've waited a long time. I'll wait a little more."

This is a classic example of someone valuing their house as what it is worth to them. Not what it is worth on the market. The market has been declining steadily since 2005 when it was originally listed. Now the owner believes it is worth $100,000 more than anyone else will pay.

The market prices during the Great Housing Bubble were an illusion. Prices are falling back on par with historic rates. It is hard for people to internalize that the value of their property is not what they think it should be.

This owner can wait it out. Most can not. This property was purchased for $230,000 in 1999. Hopefully the owner did not fall into the HELOC hype during the bubble. Is the $450,000 asking price because the owner really, truly believes that is what it is worth? Or is $450,000 needed to cover the mortgage equity withdrawals during the Great Housing Bubble? Too bad finances were never addressed as part of this article.

4 comments:

Anonymous
said...

The seller wants to have his cake & eat it too. In one paragraph, he speaks about selling the house at $525,000 at first and how it is still worth $450,000. Then towards the end, he complains that starter buyers expect too much.

Um, hello?!?! Starter home for half a mill? If you are asking that much, it better be upgraded top to bottom. But to ask that price for a place on a busy street with laminate counters and vinyl floors, you are on drugs.

In short, he'll choke on that house. Someone should send him a link to an online compound interest calculator.

The seller could have sold it for $495,000 in 2005 but was greedy. That offer-maker is probably glad now that they were turned down. This seller will be lucky if he can get above $350,000 and that is not going to change anytime soon.

Watch. This seller will stubbornly remain in his home for another 10 years, and finally sell to someone for his not-giving-it-away price of $450,000. Then he'll strut around saying "Ha! I knew the house was worth $450,000. Who is the dummy now!" not realizing that $450k in 2018 is not even worth the $350k he could have sold it for in 2008. He's a dope.

I also finger him as a dope in that he's been through 6 real estate agents in 3 years. At least two of them have publicly pointed out how stubborn and clueless this guy is. He fails to see that it isn't the agents or the buyers on the wrong side of the price line, it is himself.

Many times when I find these articles I can't understand why people go public with this type of stuff. Did he think someone would fall in love with his house from the article and offer him the $450,000? Does he think he looks good jumping from one realtor to another?

I think with the stubbornness illustrated people would be more cautious about entering a contract with him. He hardly seems like he would negotiate anything found during inspection - and in a 100 y.o. house they will find something or other.

The other thing is the "barn" just looks like a garage with a second floor that takes a huge chunk of the backyard. The property may be large but does not look very kid friendly.